Effect of Oil Price on DSU Valuation, page-3

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3bananas

8 Posts.

23/11/21

11:16

Post #: 57777983
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Originally posted by danpech: ↑

NPV of oil in the ground is a certainly a function of the oil, gas and NGL commodity mix price, especially for BRK because of it's 3 commodity revenue stream.

Other factors that affect the NPV of PUD reserves is the productivity of the formations and wells that will drain the reserves. This will affect they payout period so an acreage position with a 10MMBOE reserve which will have 50% of those reserves drained in the first 2 years will have a higher NPV than if it takes 10 years to drain 50% of the reserves.

Then you have availability of infrastructure to get the hydrocarbons to market and cost of services such as drilling and completions.

The feature of the BRK acreage is that the SWISH DSU's are located in the core of the core premium location for acreage quality which is highly sought after, and will be increasingly so when Rangers and Flames come on line.

Testimony of the high value PUD's was the fact that BRK was planning to drill the acreage at US$40 oil and were lucky to time flush production at oil twice that amount.

Hope that helps

Cheers

Dan

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Thanks for the reply @danpech - appreciate your insight as always. I think it would be an interesting exercise to try DSU valuation at different oil price points (eg. $40/60/80/100/120) to get a feel for the valuation "distribution". I would try myself but I'm uncertain as to how the NPV dollar value would change with respect to say a $20 change in the spot price (naturally it can't be as simple as $ for $ based on some of the points you bring up above).

That all said I certainly feel the distribution is skewed heavily to the upside, i.e. we're more likely to see $120 oil than $40 oil in 2022 and beyond so things certainly do look on the up and up!

BRK Price at posting: 2.1¢ Sentiment: Hold Disclosure: Held
7 Upvote

0 Great analysis

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